1/ “How to judge a startup?” is the winner of the poll I did yesterday on angel investment topics.
This is a complex topic and deserve multiple tweet storms.
Let me first start with deciding what spaces you will invest in: “your investment thesis”.
This is a complex topic and deserve multiple tweet storms.
Let me first start with deciding what spaces you will invest in: “your investment thesis”.
https://twitter.com/immad/status/1462178103350861832
2/ With a thesis you: a) develop an expertise in judging startups in that space, b) can talk to multiple entrepreneurs and iterate your ideas.
I tend to have a combination of broad + very specific theses that I adapt over time.
I tend to have a combination of broad + very specific theses that I adapt over time.
3/ For a narrow e.g.: In 2016 I had a thesis that vertical applications of autonomous vehicles would be big. I invested in 6 startups and 2 ended up being a hit: @embarktrucks (autonomous trucks, public ~$4bn market cap) and @bfrobotics (autonomous tractors, acquired for $250m).
4/ The autonomous vehicle thesis proved out to be successful.
A less successful thesis I had is that home IoT would be a much bigger hit and needed better software. I have invested in 4 companies in that space, some of them may still work out but it’s not an obvious win.
A less successful thesis I had is that home IoT would be a much bigger hit and needed better software. I have invested in 4 companies in that space, some of them may still work out but it’s not an obvious win.
5/ Having multiple theses—and multiple companies in each thesis—gives you a fairly differentiated strategy.
2 out of 6 autonomous vehicle startups were a hit, as well as 0 of 4 of the IoT startups. With just 2 out of 10 hits, you still gets a 10x portfolio in seed investing.
2 out of 6 autonomous vehicle startups were a hit, as well as 0 of 4 of the IoT startups. With just 2 out of 10 hits, you still gets a 10x portfolio in seed investing.
6/ In order to form a thesis I look at:
a) large or expanding markets
b) technology or societal trends
c) talk to entrepreneurs in and outside your current thesis
d) listen to podcasts + read
e) focus on spaces I understand
a) large or expanding markets
b) technology or societal trends
c) talk to entrepreneurs in and outside your current thesis
d) listen to podcasts + read
e) focus on spaces I understand
7/ You don't have to be contrarian in your thesis, but if you do pick a non-contrarian one, it helps to be narrow.
e.g.: everyone is investing in fintech right now. But you might have a thesis that "vertical consumer neobanks will be huge".
e.g.: everyone is investing in fintech right now. But you might have a thesis that "vertical consumer neobanks will be huge".
8/ ~10% of the pitches you listen to should be interesting startups outside your current theses.
This helps find new theses to invest in and keep current on what you are missing out on. This is how I ended up investing in @momentusspace and getting into space tech startups.
This helps find new theses to invest in and keep current on what you are missing out on. This is how I ended up investing in @momentusspace and getting into space tech startups.
9/ There isn’t an exact answer to “how to judge a startup?”. Hopefully that gives you some insight on how I think about investing theses.
I will cover other subjects on judging a startup in future tweet storms.
I will cover other subjects on judging a startup in future tweet storms.
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